China plans to sell US government bonds worth 3 billion USD, sending signals of concern to foreign investors on the background of trade tensions with the US and problems in its own stock markets. It will be the second bond sale in dollars in an year and only the third since 2004.
China’s Finance Ministry has committed dozens of Chinese and international investment banks to deal with the sale. The plans are US bonds to be sold next week.
Among the financial institutions involved in the offer are Bank of China, China Construction Bank, Deutsche Bank, Goldman Sachs Group and JPMorgan Chase.
The plan is to hold a meeting of bond investors in Hong Kong on October 9, with the sale likely to begin soon after.
China intends to sell government bonds with 5-, 10- and 30-year maturity, as well as to become a regular public debt issuer.
The debt issue takes place at a delicate moment for the world’s second-largest economy. China’s Gross Domestic Product is slowing down, as well as the pace of investment in factories and public projects. Only since the beginning of the year the Chinese index Shanghai Composite has dropped by 15%.
Despite all the problems, however, bond investors still appreciate China’s creditworthiness as very high due to the country’s stable foreign exchange reserves and large trade surpluses.
In October 2017, the country sold 5- and 10-year government bonds worth 2 billion USD at slightly higher interest rates than those paid by the US Treasury in the relevant period, although the Chinese credit rating is three to four degrees below that of the United States. Since then, yields on US government securities have risen after several increases in interest rates.